Fitch Affirms Chesterfield Valley Transp Devel Dist, MO Sales Tax Bonds at 'BB'; Outlook to Positive

  Fitch Affirms Chesterfield Valley Transp Devel Dist, MO Sales Tax Bonds at
  'BB'; Outlook to Positive

Business Wire

NEW YORK -- January 3, 2013

Fitch Ratings has taken the following action on Chesterfield Valley
Transportation Development District, MO's (the district) bonds:

--$16.1 million series 2006 transportation sales tax revenue bonds affirmed at
'BB'.

The Rating Outlook is revised to Positive from Stable.

SECURITY
The bonds are limited obligations payable solely from the net revenues of a
0.375% sales tax on retail sales collected within the district, subject to
annual appropriation. The sales tax expires February 2031, five years after
the final maturity of the bonds. There is also a cash-funded debt service
reserve fund (DSRF) with a $2.03 million funding requirement; the DSRF is
currently fully funded.

KEY RATING DRIVERS

RECENT SALES TAX IMPROVEMENT: The Positive Outlook reflects continued progress
in expansion of the sales tax base with the planned opening of two sizeable
outlet centers on track for later this year.

IMPROVING BUT VOLATILE REVENUE: Sales tax collections for 2011 and 2012 were
up considerably versus prior years, reflective of an improved local economy,
but inherently remain subject to cyclical volatility.

REVENUE UNDERPERFORMANCE & DSRF RELIANCE: Revenue performance remains
consistently below expectations at the time of issuance, triggering a reliance
on the cash funded debt service reserve fund for the past three years. Strong
revenue performance of late and an expanded base should aid the district in
eliminating its dependence on the DSRF over the near term.

BULLET MATURITY & REQUIRED TURBO: Fitch views the debt structure as generally
weak with interest only payment requirements between 2017 and 2025 and a
bullet maturity in 2026. However, in the event excess revenues start flowing,
the structure does require early redemption.

ACCESSIBLE LOCATION: The district encompasses a five mile commercially
attractive retail corridor along Interstate 64 which caters to the affluent
St. Louis County region.

WHAT COULD TRIGGER A RATING ACTION

SALES TAX BASE EXPANSION: An evident expansion of the sales tax revenue base
from the upcoming opening of two outlet malls would likely enhance pledged
revenues, debt service coverage and overall credit quality.

CREDIT PROFILE

The district encompasses a sizable 7.43 square mile area located along a
five-mile corridor of Interstate-64 in western St. Louis County. As of
December 2012, there were 374 retail establishments located within the
district.

SALES TAX REBOUND
Sales tax revenues for the first 10 months of 2012 increased by a robust 7.5%
over same period collections in 2011. The district expectation for full year
collections are to show a 7.1% year over year increase in revenues,
incorporating management's projected sales tax revenues for the remaining two
months of 2012. Fitch believes this is a conservative projection given recent
sales tax trends. Assuming projections are achieved, 2012 will be the first
year since 2008 in which revenues exceeded current debt service requirements.
This growth follows an 8.5% increase in sales tax revenues in 2011 compared to
2010.

RECENT REVENUE SHORTFALLS
Between fiscals 2007 and 2010, sales tax collections in the district fell by
nearly 16%. The decline was mostly attributable to the recession but also due
partly to a one month payment lag in 2010, created when the state assumed
sales tax collection responsibilities from the city of Chesterfield (the city)
in early 2010. In addition, the 2006 issue was structured based on
over-optimistic sales tax projections, leading to marginal debt service
coverage from the onset.

Sales tax revenues were insufficient to meet debt service requirements as a
result of these declines, forcing the district to draw upon the DSRF annually
beginning in 2010. Draw-downs totaled $183,000 in 2010, $399,000 in 2011 and
$404,000 in 2012 to cover 11%, 24% and 24% respectively of the larger April
principal and interest payments in those years. In all three years, the DSRF
requirement was restored before the end of the year as sales taxes were
received and deposits were made per the flow of funds. Management is
projecting a smaller $350,000 (18%) draw in April, 2013, with additional draws
in 2014 and 2015. After 2015, debt service drops significantly until 2026.

Fitch views the bond structure as weak with a large bullet maturity in 2026
and interest payments only from 2017 through 2025. However, in the event
revenues exceed debt service requirements, all excess sales tax revenues are
required to redeem the 2026 bullet via a mandatory redemption feature. To date
the turbo feature was only triggered once in 2008 due to general
underperformance of revenues compared to projections at the time of issuance.

Assuming projected 2012 sales tax levels and no subsequent growth, Fitch's
analyses indicate that pledged revenues and DSRF monies should be more than
adequate to cover all debt service requirements. Under Fitch's stress
scenario, sales tax collections could decline by 10% in 2013 and an additional
4% annually over the life of the issue and, with remaining DSRF monies, still
meet all debt service requirements. The largest revenue decline to date was
7.6% in 2010.

SALES TAX CONCENTRATION
The district encompasses a sizable 7.43 square mile area located along a
five-mile corridor of Interstate-64 in western St. Louis County. As of
December 2012, there were 374 retail establishments located within the
district, comprising one of the largest concentrations of big box retailers in
the region. There is point-of-sale concentration with the top 15 payers
accounting for 55% of total sales tax collections, which is not uncommon for a
retail complex with sizeable big box presence. The district contains in excess
of seven million square feet of development with over 10% of the total land
area still undeveloped.

The district expects four large stores recently opened to be top 20 sales tax
generators. In addition, the district reports that two large outlet malls
contemplated last year are currently under construction by Simon Property
Group and Taubman and on track to open in August, 2013. The addition of these
two malls would notably expand the sales tax base which Fitch believes could
have a positive impact on the rating.

WEALTHY, GROWING SERVICE AREA
Wealth levels in the city and county are well above state and national
averages, and unemployment rates are below comparable levels for the state and
country, rebounding from increases during the recent economic downturn. The
county supports a diverse economic base, which includes Boeing and Washington
University.

The city has several major economic development projects underway, highlighted
by significant growth at Mercy, a large health care system headquartered in
the city, as well as the relocation of the headquarters of Reinsurance Group
of America to Chesterfield. These projects will bring a sizable number of
workers to the area, increasing the population of potential shoppers within
the district.

APPROPRIATION RISK
The district is managed by a four-member board consisting of representatives
of the city and county. The pledged sales tax is subject to annual
appropriation by the district. However, non-appropriation is unlikely as the
pledged sales tax cannot be used for non-district purposes. Furthermore, if
the district fails to adopt a budget in any year, the prior year's budget will
remain in effect.

WEAK LEGAL PROVISIONS
The bond documents are loosely written, allowing for liberal issuance of
additional parity debt. However, officials indicate that there are no plans to
issue more bonds and an independent board composed of various county and city
officials would be expected to curtail excessive issuance.

Additional information is available at www.fitchratings.com. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.

In addition to the sources of information identified in Fitch's Tax-Supported
Rating Criteria, this action was additionally informed by information from
Creditscope, University Financial Associates, S&P/Case-Shiller Home Price
Index, IHS Global Insight, Zillow.com, National Association of Realtors.

Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria', dated Aug. 14, 2012;
--'U.S. Local Government Tax-Supported Rating Criteria', dated Aug. 14, 2012.

Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686015
U.S. Local Government Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685314

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Contact:

Fitch Ratings
Primary Analyst:
Eric Friedman, +1-212-908-9181
Director
Fitch, Inc.
One State Street Plaza
New York, NY 10004
or
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Analyst
or
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